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Romano, Inc. is deciding whether to buy a machine that assembles products so that it can reduce labor costs. The machine has in initial cost of $460,000 and an estimated life of 8 years. Maintenance expenses are expected to increase from $24,000 to $38,000 per year if the machine is brought. The company estimates the new machine will speed up production and be able to generate annual revenues totaling $740,000 up from the current revenue of $690,000. Romano estimates the machine can be sold at the rate of return is 7% and its income tax rate is 30%. How much is Romano's annual after-tax operating cash flows if the machine is acquired?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M953103

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